PAGA Repeal May Be On the Ballot in 2022

Akin Gump Strauss Hauer & Feld LLP

Earlier this month, a coalition including the California Chamber of Commerce, California New Car Dealers Association and Western Growers filed a proposed initiative measure entitled The Fair Pay and Employer Accountability Act of 2022. Although it is stylized as an amendment to the Private Attorneys General Act (PAGA), the proposed initiative effectively repeals PAGA by taking away the ability to pursue civil penalties via a representative action.

The proposed initiative—which would change the title of PAGA to the “Labor Code Fair Pay and Accountability Act of 2022”—summarizes its purpose as follows:

  • Allowing workers to recover compensation without hiring a lawyer.
  • Streamlining the system so workers can receive what they are owed quickly and efficiently.
  • Holding employers who “cheat workers” accountable by doubling existing statutory and civil penalties for willful violations.
  • Protecting small businesses from “shakedown lawsuits.”
  • Reforming the law so workers receive 100 percent of the monetary penalties imposed, instead of 25 percent going to workers and 75 percent going to the California Labor and Workforce Development Agency (LWDA).
  • Providing resources to guide and assist employers with compliance.

Most significantly, the proposed initiative would eliminate the essential feature of PAGA: the ability for aggrieved employees to stand in the shoes of the Labor Commissioner and recover civil penalties through a representative action. Instead, the proposed initiative would place greater enforcement responsibilities on the Division of Labor Standards Enforcement (DLSE) and require that the state sufficiently fund the DLSE’s mandates, thereby removing the purported need for private enforcement. For example, it calls for the creation of a Consultation and Policy Publication Unit, which workers could contact to report violations of the Labor Code and Industrial Welfare Commission wage orders. It also would require the DLSE to be a party to any employee complaint filed with the Labor Commissioner and would amend Labor Code Section 90.5 to task the Labor Commissioner’s field units with “managing wage claims involving multiple employees.” Separately, the proposed initiative provides that arbitration agreements would have no effect on any complaints employees file with the Labor Commissioner, and it strikes Section 2699(g)(2), which prohibits recovery of PAGA penalties for any violation of a posting, notice, agency reporting or filing requirement.

The Fair Pay and Employer Accountability Act of 2022 faces a long road ahead if it is to be enacted into law. The next step is a public comment period that runs through November 3, 2021, after which the Attorney General must draft a working title and summary, and the proponents must draft the petition to prepare for circulation. To qualify for the ballot, the initiative petition must then receive over 600,000 signatures from registered voters, representing 5 percent of the total votes cast for the office of Governor at the last gubernatorial election. Cal. Const., Art. II, § 8(b); Elections Code § 9035. Once on the ballot, the proposed initiative will likely need substantial financial backing to stand a chance on election day. In 2020, for example, the 12 initiatives on the ballot generated a total of over $785 million in campaign funding.

In fact, if history is any guide, the Fair Pay and Employer Accountability Act may struggle even to qualify for the ballot. In 2017, three PAGA-reform initiatives were filed, but did not gather the requisite number of signatures before ultimately being withdrawn. However, as the passage of Proposition 22 in 2020 demonstrated, business-driven employment law ballot measures are not necessarily off the table, even in solidly blue California.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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